Total has acquired Marathon Oil Libya Limited which holds a 16.33 per cent stake in the Waha Concessions in Libya
This acquisition will give Total access to reserves and resources in excess of 500 mmbbl of oil equivalent, with immediate production of around 50,000 boepd and a significant exploration potential across the area of 53,000 sq km covered by the Concessions in the prolific Sirte Basin.
The consideration payment for the transaction is US$450mn.
“This acquisition is in line with Total’s strategy to reinforce its portfolio with high quality and low-technical cost assets whilst bolstering our historic strength in the Middle East and North Africa region,” said Patrick Pouyanné, chairman and CEO of Total.
“It builds on the Group’s long-term presence in Libya, a country with very large oil and gas resources, and demonstrates our commitment to continue supporting the recovering oil and gas industry of the country,” he added.
The Waha Concessions currently produce around 300,000 boepd. Due to the ongoing restart of the existing installations and the resumption of development drilling, the output is expected to ramp up and exceed 400,000 boepd by the end of the decade.
The NOC (59.18 per cent), Total (16.33 per cent), ConocoPhillips (16.33 per cent) and Hess (8.16 per cent) jointly own the Waha Concessions. The Waha Oil Company, a 100 per cent NOC owned entity, operates the asset.
Commenting on the Total’s acquisition of Marathon’s stake in Libya’s Waha field, Luke Parker, vice-president for corporate analysis at Wood Mackenzie, said, “The deal is arguably opportunistic (some of the best deals are) and – much like the Maersk acquisition last year – comes as something of a surprise. But it fits with Total’s strategic objective of accessing low-cost oil, and consolidates an existing position: Total has a long history of operating in Libya, and is obviously comfortable with the risk-reward balance.”
“Production and reserves growth is a major deal driver. There's certainly upside from where we are today. Total believes production can increase from 300k boepd (gross) today, to 400k boepd by 2020, with plenty of upside – discovered resource and exploration – beyond then. Realising this upside would see Total create significant value through the deal,” Parker also added.
However, there are risks to the growth story, according to him. “In recent times production has been constrained for prolonged periods due to shut-ins at export terminals. Stability has improved, but the lack of central government means the risks of tribal disputes and labour strikes blockading critical infrastructure remain acute.”
“Libya had looked non-core for Marathon for a while, the disposal is no surprise. All three US partners in Waha, Conoco, Marathon and Hess, have been rumoured to be seeking to exit Libya for some time. Political risk and US investor sentiment means Libya doesn't sit comfortably within these companies' portfolios. The deal follows Oxy's 2016 divestment from Libya to OMV, another less risk averse European incumbent. We wouldn't be surprised to see Conoco Philips and Hess exit too,” Parker commented.
